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IFRS 16 – Accounting for VAT on lease payments by lessees

IFRS 16 Leases requires that the right of use asset (ROU) and the lease liability should initially be measured at the present value of the minimum lease payments (MLPs). IFRIC were asked to consider how irrecoverable Value Added Tax (VAT) charged on lease payments should be accounted for, given IFRS 16 is silent on the matter. Should the irrecoverable VAT be included in or excluded from the valuation of the ROU and the present value of the MLPs?

Source: rsm.global

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